Legal & General Life of Australia Ltd v A Hudson Pty Ltd

Judgment 1HIS HONOUR: The plaintiffs brought proceedings against the defendants for orders under s 232(1) of the Corporations Act 2001 (Cth) alleging that the affairs of two companies, Contact 121 Pty Ltd and Contact 121 (Qld) Pty Ltd (together "the companies"), in which the plaintiffs hold 47.5 per cent of the shares and the defendants hold the remaining 52.5 per cent, had been conducted oppressively. 2The companies have at all material times carried on business as a telephone contact centre. 3The proceedings were resolved by consent orders made on 21 December 2009 under which the defendants (or if the parties otherwise agree), the companies, are to purchase the plaintiffs' shares. 4In the Consent Orders the Court noted that the parties had agreed to appoint Brendan P Halligan, a business valuer and chartered accountant, (trading as Halligan & Co), to provide a market opinion as to the market value ("Value") of all issued share capital in each of the companies and that the parties had agreed that the Value would be binding on them for all purposes in the proceedings. The agreed valuation date is 31 December 2009. 5On 21 December 2009, the parties and Mr Halligan also executed an engagement letter specifying the scope of Mr Halligan's instructions. He was to provide an opinion on the market value as at 31 December 2009 of all the issued share capital in the companies taken as a combined entity on the basis that the effect of any transactions between the companies was to be eliminated and on the assumption that conduct (which was described in the letter and which is alleged by the plaintiffs to have been oppressive) had not occurred. 6The letter provided that Mr Halligan would conduct the engagement in accordance with the professional ethical pronouncements of the Institute of Chartered Accountants in Australia, including professional standard APES 225 which is entitled "Valuation Services" ("the Standard"). The letter incorporated a document entitled Standard Terms, para 3.1 of which is in the following terms: We must use all reasonable commercial efforts to perform the services with professional competence and due care. However, the quality of the Services will depend on input from you 7Paragraph 5.2 of the Standard (issued in July 2008) contains, relevantly, the following: Where a Member in Public Practice prepares a written Valuation Report in respect of a Valuation Service the Valuation Report shall clearly communicate: (a) The name of the party engaging the Member; (b) A description of the business, business ownership interest, security or intangible asset being valued; (c) The date at which the value has been determined; (d) The date on which the Valuation Report has been issued; (e) The purpose for which the Valuation Report has been prepared; (f) The name and qualifications of the Member(s) responsible for the Valuation; (g) The scope of the Valuation including any limitations or restrictions; (h) The basis of the Valuation; (i) A statement whether the Valuation was undertaken by the Member acting independently or not; (j) The Valuation Approaches adopted in determining the estimate of value and the description of how they were applied; (k) The specific information on which the Member has relied and the extent to which it has been reviewed; (l) A description of the material assumptions applied in the Valuation and the basis for those assumptions... 8Mr Halligan provided his report on 22 February 2011 ("the Report"). He concluded that, as at the valuation date, the market value of all the issued share capital of the companies, taken as a combined entity, was in the range of $3.439M to $3.839M and that an appropriate point estimate of value within that range is $3.639M, approximately the mid-point. On this basis, the defendants are obliged to pay to plaintiffs $1,728,525. 9Appendix A to the Report is entitled "Important Matters". Under the heading "Reliance on Available Information", paras A.14 to A.16 state as follows: A.14 The statements and opinions given in this Report are given in good faith and in belief that such statements and opinions are not false or misleading. A.15 In preparing this report we have relied on information supplied by the Clients, which we believe to be reliable and accurate. A list of the information we have relied upon is appended to this report. We have no reason to believe that any material facts have been withheld from us, or that any information supplied to us was materially false. A.16 We have not verified or audited any of the information provided to us. 10The list of information referred to is in Appendix C. It contains the following: